Introduction About Gitter & Associates

WORKERS’ COMPENSATION CLAIMS: TO SETTLE OR NOT TO SETTLE? Why Settle? Approach & Methodology Indemnity Medical Medicare Non-Medical Structured Settlement Case Studies Determining Overall Value

Why Settle? Resolution of all claim issues Indemnity Medical Etc. Extinguish future exposure Avoid potential (further) escalation

Settlement: Approach & Methodology Indemnity Valuation Permanent Partial Permanent Total Disability Present Value (PV) calculation Today’s dollars relative to future dollars Importance of utilizing PV and Discounting

Settlement: Approach & Methodology Medical Valuation of Medical Inflationary Factors Medicare Medicare Set Asides (MSA’s)

Settlement: Approach & Methodology Medical: Valuation of Medical Historical review 2-3 year history of treatment/expenses Review of future needs Treatment modalities Surgeries Medications

Medical: Valuation of Medical Co-morbidity factors Hypertension, Obesity, Diabetes, History of Smoking, Congenital Conditions, etc. Co-morbidity as a Cost Driver Delayed healing process Failure to recover from surgery Inability to regain strength, ROM, etc. Acceleration of degenerative condition(s) Settlement: Approach & Methodology

Settlement: Approach & Methodology Medical: Inflationary Factors General 2-3% per year (normal goods and services) Medical 6-8% per year Medication 10-12% per year “8 by 8 Rule”

Settlement: Approach & Methodology Medical: Discounting for Present Value Present Value Calculation of Medical Determination of Annual Projection of Future Needs (treatment, surgeries, etc.) Discounting factor Variations based upon Life Expectancy One time and future needs

Settlement: Approach & Methodology Medical: Medicare Brief history and Medicare Secondary Payer Statute (MSP) $43B in liability transferred to Medicare in a 7 year span leading up to the change ( ) “Consideration” of Medicare’s interests Memoranda issued by the Center for Medicare Services

Settlement: Approach & Methodology Medical: Medicare Set Asides (MSA’s) Medicare Part A & B Part “A”: Inpatient Hospital care, skilled nursing facilities, LIMITED home health care (stemming from a hospitalization) Part “B”: MD visits, diagnostics, physical therapy, supplies, etc.

Settlement: Approach & Methodology Medical: Medicare Set Asides (MSA’s) Medicare Part “D” Medications (“labeled” usage only) Coverage for 2013 Medicare Pays $1, of the first $6, Catastrophic Coverage above this amount is 95%* *(weighted cost brand vs. generic) Beneficiary out of pocket exposure INCREASED by 29% ($1,150) from 2006 to 2013

Settlement: Approach & Methodology Medical What is not covered by Medicare? Most attendant/Home Care “Off-label” medications Chiropractic Care (unless prescribed by a MD) Acupuncture 20% Deductible

Settlement: Approach & Methodology Non-Medical “Other” items to consideration in valuing a case Home care (housekeeping, lawn services, etc.) Attendant Care Retroactive benefits Misc.

Structured Settlements Description Components Cash Annuities (creativity is the key) Internal Rate of Return Benefits to the Parties Employer Applicant

Case Study #1 “Dogs” 59 Year-old Registered Nurse sustained injuries to her spine, bilateral upper/lower extremities, psyche and internal systems Permanent Total Disability Extensive Future Medical Care Assisted Living Facility Future value established at $2.1M Settlement at $1.25M SAVINGS: $900,000.00

PAYMENT DESCRIPTION COST EXPECTED PAYOUT TOTALS: $1,250,000 $1,476,441 CASH AT SETTLEMENT $460,185 $460,185 MEDICARE SET-ASIDE ALLOCATION MSA “seed” Money $40,282 $40,282 MSA Annual Payments ( $16,141 $144,058 $225,974 due annually, if living for 14 years) ANNUAL ANNUITY PAYMENTS $605,475 $750,000 $75,000/year for 10 years Certain SETTLEMENT PROPOSAL CLAIMANT: ROT W. EILER DOB: JUNE 14, 1940 (AGE 66) NORMAL LIFE EXPECTANCY: 19.5 YEARS

Case Study #2 “The Boat” 58 year-old School Maintenance Worker sustained multiple orthopedic and internal injuries (strokes/heart attacks) Permanent Total Disability Medical care at $10k annually – significant co-morbidity issues Value established at $1.3M Settlement of $330, SAVINGS: $975,000.00

PAYMENT DESCRIPTION COST EXPECTED PAYOUT TOTALS: $329,957 $663,695 CASH DUE AT SETTLEMENT $72,500 $72,500 MEDICARE SET-ASIDE ALLOCATION MSA “seed” Money $7,435 $7,435 MSA ANNUAL PAYMENTS ( $3,485 due annually, if living for 16 years) $26,897 $55,760 LIFETIME INCOME PAYMENTS $223,125 $528,000 $2,000 monthly, guaranteed to Age 65, and payable monthly thereafter for life. SETTLEMENT PROPOSAL CLAIMANT: BASS MASTER DOB: AUGUST 27, 1948 (AGE 58) NORMAL LIFE EXPECTANCY: 22 YEARS

Case Study #3 36 year-old Machine Operator sustained a closed-head trauma after being struck by an ejected board Permanent Total Disability Substantial Future Medical needs Valuation established at $2.4M Settlement at $750, SAVINGS $1.65M

Case Study #4 A 52 year-old Forklift Operator sustained injuries to his spine, left hip and psyche Substantial Permanent Partial Disability Ongoing medical care at $10,000.00/year Valuation established at $525, Settlement of $100, SAVINGS $425,000.00

Case Study #5 48 year-old Office Supervisor sustained injuries to her neck and bilateral upper extremities Limited Permanent Partial Disability Ongoing medical care at $4,300.00/year Valuation established at $133, Settlement of $68, SAVINGS $65,000.00

Determining Overall Case Value Computation & Utilization of PV Indemnity Medical/Medicare Set Aside (MSA) Discount rates used to estimate Future Value Indemnity Medical (MSA and non-covered items)

TO SETTLE OR NOT TO SETTLE? Benefits of Claim Resolution Future Cost Savings Mitigation of Expansion of Claim Reserve Reduction/Removal CLOSED FILE!

Questions?

Gitter & Associates, Inc S. Escondido Blvd., suite 201 Escondido, California PHONE: (877) Fax: (760) Thank you!